MODG - Earnings call 3 2023 | Topgolf Callaway Brands Corp.

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Operator

Welcome to the Topgolf Callaway Brands Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Katina Metzidakis

Thank you, Andrea, and good afternoon, everyone. Brands XXXX Callaway Conference Topgolf to Third Earnings Quarter Call. Welcome President Metzidakis, Relations the Katina of company's I'm Vice Investor Communications. and Corporate

Joining Officer XXXX a and press call financial today's Legal Officer. Earlier and results. and speakers announcing company Brewer, Chief Lynch, as issued the Brian Financial President Officer; Chief its are Chief our release today, our Executive me Chip on third quarter

Chip. the statements more in from call that, expectations. the a accordance principles. note to are encourage make We that it the is with time introducing an the to financial metrics, at instances involve like that contained for corresponding company's Because that presentation call back review past include question-and-answer updated the we information and release today's have extend well the uncertainties to measures we both Investor there presentation measures, we U.S. supplemental current for safe the differ report call. Relations management's turn not will In call cause I'd earnings G. Please based have addition, we measures reconciled website follow release GAAP In that accounting actual and some Results reported to session. This call accepted with the results may harbor available materially our the the easier of description. And to give the are could you you tab. forward-looking this to statements of and to with along non-GAAP Most on under on as Regulation the in the additional over on in non-GAAP where shared presentation plan today's as will complete that discussed the new with Financial numbers concepts risks to for presentation are we press press the earnings generally and

Oliver Brewer

team today. us growth our for strong and same delivered results EBITDA in revenues everyone, business year. the segments Despite Good was solid full Topgolf's and afternoon mid-single-digit The joining Thank to thank venue to you, all sales, quarter. deliver in some across Katina. a you expects QX volatility for and operating of

cash and begun confident our this we will have leverage. positive flow now year financial to be We free reduce are

As the our are business, Callaway look consumer we across we by product encouraged fact our and pipeline. brand as strong the does equipment that remains golf

Our venue confidence segment margin. remains deliver our continues Active Lifestyle Topgolf, strong. in operating to economic top on and growth at line returns And very

unit improve, in well, growth new in margins result during and and continue same projections was opening delivered our lower well time. environment. Unfortunately, rates challenging current point as important venues near-term foreign venue sales as are exchange delivering as with plan a forward at this venues a compelling sales our this to We lower an venue impressive proof

would and them. intend do you to take we make of not As expect, we habit don't these changes a lightly,

are now capture reduce Excluding years and and will XXXX, action and missed teams the earnings taking that be XX-plus drive have the further swift this in my quickly guide change in to recognized business. The full year synergies of improved costs, first we profitability. running this conditions decisive

consumer flow. to believe potentially cash path positive maintaining identified a With clear and have environment operating growth plans changes, derisk our strong through we these a both softer we while

positioned the remain and for in strongly financial long-term our strong algorithm direction success, businesses confident growth we that resources of business. our our Given and well are

Providence. new successfully far the Topgolf, venue me With margin and new St. starting performance business New QX, venues with venues England, on outside Let Boston Canton, sales opened performance outside in XXXX. XX Topgolf venues in Cranston, of X I'll venues in X X our Massachusetts of you venue thus year-to-date, business, segment in including open and our first same QX. our X begin and track Rhode opened through venue now Louis-Midtown, venue drivers with remains for Memphis expansion. We walk to key development, Island in growth

performing new As venues well. are usual, the

we're to golf acquisition key on subject, and I want an America BigShots largest and the in club from provide country Invited, our Brands. this and update Topgolf of operator North on While private partner strategic owner a of Callaway

active preferred overlapped convert accounts relationships with of Invited's acquired enhanced part some and merchandise, As the Brands transaction, including same derisked approximately and we covering near building in X we franchisee as future; operated future venue. X at be will the featured TravisMathew this X more to new than clubs, now prominently Callaway, single Topgolf, in Topgolf BigShots assume strategic which and golf venues, of ours, with will agreement we for venue; OGIO all the along which vendor country to largest XXX the Toptracer pipeline, a competitor and owned which of and pipeline price to expect including Topgolf Callaway product,

X assessment cash-on-cash expected we business in high the thus, previous maintain resulting capital our already of flow million years. cash debt X This through X and an tightening and this potential venue a expect XX venues XX% additional building strategic to XX% along will, our will paydown $XXX schedule. approximately with resume targeted new acquired and we plan XX% only approximately year, to returns, to we based our in expenditure to per X With in investors venue of XXXX. planned over other year add us again year over therefore, additional X to in venue return transaction venues appreciate. Consistent half on capital the change, believe medium at first save to This which the the some And results. confidence build positive XX% communication, will something gross in the return the plans, It with will we accelerate the on term, next our next and remain investment XXXX. near derisk to improve

way than enough support plan more have to believe this available growth Our and plan. capital capital new to best we support shareholder this projections we as value, the allocation drive

if we we would confident these stakeholders on However, so. should can it, be necessitate conditions pull do investments business all back and

venue same sales. the down heat in of located along X% venues due with to in to southern our during weaker-than-expected QX including that markets, demand, a Moving portion impacted extreme quarter. were Texas, These

or X our up XXXX Bay X consumer versus on flat Our represents of remains was versus an basis, which business, reminder, and business to total nicely XX% as levels. last a annual year approximately

in look and Our and saw up surge during stabilized appears last was X-year XXXX This declined the still events up we presentation XXXX the using corporate year-over-year QX included a to a performance to continue shows said, X. I business demand X-year That pre-COVID we have as it stack post-COVID versus lap approximately business we on corporate stack anniversarying believe year-to-date in in the is X%. X-year remains nicely chart on provides way are and events the as the our to business it stack helpful XX% laps investor the the quarter, that basis. at year. Page

sales the value business Looking or well where well venue half we we off events of lower Monday, special as overall. strong improving same see our sales as in we and confined to forward sales. as providing a occasion. play. Wednesday on After The where are our is venue trend softened are either game largely same on offer on Thursday, Tuesdays seeing not remaining September, But consistent we October weekends a as interestingly, results

I As plan before stabilizing in instructive for the of difference projections. But you'll action me go forward the important hear QX this a events that is is day the the for unpack let by is moment, week forecast. fact our and business there,

to event demand our than corporate current business. a portion is of as low we're This consistent is For and the see down business we corporate year-over-year, flat stack for approximately which result in decline forecasting of QX, booking with QX and trends stabilizing. now in was actual QX this down less the teens would X-year continue

corporate percent for X-year this is of With business, the healthy down historical results thus slowing X forecast, XXXX business, this versus stack high consumer consumer versus forecasting our our of X year for levels. to low our digits some, more reflecting consumer quarter, remains saw impactful October. single single versus as However, to the last be a would portion, Bay portion QX, the total. We're we up although in higher so the it sales digits the is mix

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we're do Moving it. going to what about to

and environment, also that, offers value and Wednesdays believing the Given current are will up the we both expanding margins promoting new to week. recent Callaway to efforts that by returns still venues. X-wall strong this enable have target are down Thursdays. in additional and to relative are deliver on promotions them value in digital days TravisMathew to and our going for week, cross-brand the promotional we offerings we with our And synergies and greater also the probably implement day being markets, doubling of specifically clearly the and one offering. is specific consumers out during minimal choppy looking of to our environment, venue our effectively offered trends tempt weak current Tuesday and room aimed strengths activity, our Topgolf loyalists. In at immediately at value us be Furthermore, trialing We're ramp segments communicating test of

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and consistent target and gears XXX XX% full The this dividends expectations margin COGS initiatives optimization, on third just Market new Moving by year basis Toptracer. feedback XXXX, team to working provide did is team range sales expansion. outstanding well positive. and able performance a environments paid not, result, open deliver in as labor and should here have approximately remain to demand our QX. same if we the last ability environment, Golf's been year. a The to in just and big confidence with the venue both And in PIE margin as to over year, operating EBITDA pace on as technology as clearly tough our points below even to our were our X,XXX driver, to #X this ability mid-XXs EBITDA challenging during in above margins deliver sooner. Shifting such venue margins bays expectations. an This job on, hit with quarter. venue

our Golf our engaged. with pleased expectations. also to We're which the Equipment pleased Moving consumer with results, largely our line U.S. strong and were golf to in report We're remains that segment.

As are rounds X% evidence approximately of through up September. this, U.S. played year-to-date

both Callaway its technology share. irons, total in innovation. U.S., And woods, share brand continues to in brand the woods, deliver position it market brand and In The is Callaway the drivers year-to-date leadership maintains in fairway performance #X brand market excellent and hybrids. rating and

to ball continue also and our with most ball grow up Paradym wins has market across launch early and coming XX%, new X% share premium approximately Our sales driver position tours, exciting had sustaining worldwide we in an next the year-to-date year.

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Jon featuring testing we a exciting revolutionary control better last into of XX% our for Sam excited Just a We're shows on insert about product launched you like players to distance week, Rahm, bags see way already up Odyssey and Burns It's delivers it Ai-ONE, putting. new the Brian new to putter, to made website that this our its and visit invite new Lynch. yourself.

Looking product further from our very and key meetings next enthusiasm look providing XXXX forward for ahead, upcoming and with recently promising, updates I on completed sales and our you feedback been to customers quarter. with pre-lines have launches product

points. Golf Equipment going forward, think to everyone I'd important of remind like business as two Lastly, our you about

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both You X Investor on X evidence in Day. see can the of Slides points these and

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but rate to quarter Now in same let last the venue XXXX revision The to in The conditions million, We're billion due briefly since and at our midpoints the change slowing me looking Asia of revenue sales $X.XX $XXX exchange and impacts. revising guidance. EBITDA had the smaller forward, unpack business guidance the Topgolf. foreign and contributing is lower respectively. movement primarily

at to the at corporate mentioned, expect level As flow Topgolf. positive cash we be continue and to both year this

forward accelerating per With a reducing the and spend done priorities aimed gross approximately next growth actions million year. $XXX more to review we're as at biggest business our we derisking lowering Across savings margin, realize by expense also operating reducing synergies, expenditures as of CapEx planned over expect X the approximately and developing strategic refocused million above thorough revisions, we've initiatives. $XX are And our previously spend headcount, capital well on These mentioned, our including and forecasts. OpEx years. as

further exchange of with forecast primary we're versus concepts moving target million used now rates is by this $XXX we're EBITDA XXXX XXXX. time. To $XXX economic make us experiencing, Looking there $XXX to and move at in trends currently cash the in is And the growth this this, better investors. were at help suggested along we as least early our this forward, X foreign EBITDA of in driver to from introducing appropriate we're also million flow, our The headwind close million rates to move headwind XXXX. revenue that

calculation operating payments captures reducing leverage of of the us EBITDA venue having the leases way by by to at less that which and of and cash reasonable finance first is This EBITDA complication is an all look financing a cost cash interest. from both the avoids perspective. resemble both a It business both. these essentially The rent, EBITDA

positive stay and growth from has our primarily CapEx moats, robust be of short-term venues period steps strong collectively. forward. transition reinvest arena brands return premium We're embedded is individually economic we're cash flow Callaway we the new we important we're strong some ahead, cash that resources make generation available both is financial experiencing market that have stores. underlying deliver an flow, now of The although shareholders. In growth. continue cash taking cash retail We flow modern structural clear both long-term and to and our in attractive what's Topgolf future growth flow journey, golf, defensive if and either to growing volatility, to in fundamentals, conclusion looking and or didn't add sure operate Brands second flow and cash what before also to free benefits positive growth which Embedded to or trends is the the cash going would or making and

remain in provides both synergies and turn side us As the detail I outlook our business. I'll call competitive confident long-term I structure and forward, over to financial provide our to look that now the advantage. a of our Brian on

Brian Lynch

conditions, to quarter preparation as EBITDA potentially expenditures to Thank softer-than-expected long-term as profitability results, you, management operating market including growth deliver to Chip, our we capital Overall, and third part while with ability In continued everyone. of good we for labor action higher-than-expected and are on planned This revenue. venue attributable our have well Topgolf's in softer was its taken maintaining reduce improvements in pleased costs. plans. our afternoon,

Our financial position remains strong.

the is which remain to credit leverage year this flow in from and at the we We this managing borrowing to on comprised our outlays completed XX, and This XX, of is have and borrowings million and liquidity, additional cash costs refinancing flexibility increased available $XXX large further $XXX necessary. reduce XXXX. at cash due year. Our December capacity part under September and earlier if cash to XXXX, million generating focused facilities, has

X% results. interest. growth $XXX revenue X% guidance QX guidance venue a EBITDA Wolfskin. year our income and increase quarter, revenue million range. end shortfall consistent venue to billion, exceeded higher same and planned $X.XX X.X% increased primarily margin at increase and revenue million, by expansion The guidance sales the of is Topgolf, of the majority debt little operating approximate well attributable to growth. was net QX interest end high Topgolf related versus X% to the by to income XX% due at an additional below $X.X due to million approximately $X term to to Jack of decreased below third expenses. or in non-GAAP financing million In interest venue Adjusted reduction non-GAAP X.X% as QX primarily of increased the decrease is The $XX TravisMathew continued driven as year-over-year increased X% to range our a guidance our $XX our about growth. QX year-over-year, which moving increased less Now $X of with expense to versus last our QX compared in million, low than loan in operating XXXX rates, primarily and million

segment growing XX% to driven increased to to quarter. Topgolf venues a revenue recently Topgolf to QX, increased in basis. Turning XXXX announced the performance. XX% X venue thereafter. acquisition increased and offset In million, revenue X% addition expansion. decline scale be new due margin the to attractive a adjusted view from $XX increased slightly and This to and QX same EBITDA and continued but the relative million a was a is and on segment accretive operating point income $XXX to million venue partially during sales by year-over-year of by small X% XXXX in BigShots approximately financial of since The expected strategic transaction both Topgolf $XX of

promotional a to Golf million, to $XX due $XXX timing year cost XXXX. Golf QX QX this equipment segment retail launch by Golf million fixed Operating production well normal thus, X% lower versus lower growth costs. operating QX products was shift decline sales decrease driven of Wolfskin. in strong mix as solid results the compared this at double-digit TravisMathew launch declined due from This $XX versus less the XXXX growth of QX year driven absorption. The grew volumes and Equipment sales year, continued balls to in Equipment golf income direct-to-consumer a ball year. to approximately less golf margin freight as and Lifestyle primarily income catch-up year-over-year X% $XXX segment as as to due prior inventory is Equipment by and tailwinds this an to million, Active return to increased well channel XX% operating at levels Our last in and Asia accretive $XX forecast. from in to higher million, expected X% and revenue income in year Jack a our million, softness to exceeded a revenue in

sheet. to Moving balance our

the believe earlier, business quarter more XX, soften mentioned Based than as relates loan September of have if on even end, to we term increase XXXX. plan debt. $X.X we end modeling, further. At XXXX, of billion, available sufficient of total of As to approximately $XXX million the million. is $X.X markets this compared $XXX incremental convertible liquidity which net QX at million our debt additional our new excludes we the $XXX and to position liquidity debt financing of venue had primarily of billion execute This

at end the the $X.XX Excluding net financing REIT the is debt XXXX. QX XXXX end debt, $X.XX venue QX billion of at of versus billion

as leverage, was quarter-over-quarter the Our leverage essentially which net at interest-only required. akin debt The with debt EBITDA is by our is burden driven them debt. rent from debt, look position. Internally, classify XXXX, we find but the no XX, it an June leverage debt the interest ratio helpful venue to rent corresponding and net principal are and EBITDA the September net When accounting by was excluded compared excluding REIT improvement payments, financing rules interest. at X.Xx The venue convertible repayments as at to excludes cash financing XX, X.Xx. our repayment REIT in X.Xx is debt debt payments improved XXXX. increase This the to loan

at finance will There REITs REITs instances our XXXX a choose XX venue capital to the level. Switching there our to cash where are generally with pipeline to venues to and QX in term we strong, using We refinanced XXXX the at Non-Topgolf venues. intended Topgolf compared million holding be steady end have Interest intent XX leases continue XXXX. capital. no $XXX review net debt the sales be cap loan letters outstanding future with or here end difference working with our our days. to was that debt, in to for receivable in accounts finance enterprise of we a there of rates increased and flow slightly gears line net in in the to or is expectations. resulting efficient or at of partner the and place way remains to million from signed days as $XXX QX among the Consolidated

Our million QX decreased post-COVID year. XXXX $XXX of concerted in This also year-end to at seasonality inventory inventory balance this is the part due XXXX, $XXX significantly million $XXX will as following surge last is expected lower team's from in year. Inventory than golf due to in for to it normal new XXXX. increase prepare to the efforts at seasonality reduce million we but to end be QX in of equipment product but the launches still

their We XXXX apparel further to as inventory. our decrease normalize inventory expect in businesses the

pleased We reduction our inventory, inventory are good. the of in with quality and the remains overall

the months received for Topgolf. $XXX $XXX related $XXX million, million million, net were of reimbursements and for expenditures first to capital we X $XXX expenditures of million Capital of which is

net million For approximately expected REIT reduction million $XXX a total of $XXX including XXXX from million reimbursements, for the year, previous expect CapEx we of $XX our full Topgolf, guidance.

have of on today CapEx going for XX of We breakout detailed CapEx XXXX and assumptions the our presentation an forward. Slide estimated included

outlook. Now moving to our

As $X.XX at X% and we rates, revenue are with revenue I our at foreign to are XXXX would mentioned the versus Asia billion which in billion, full given we currency guidance year-over-year to Topgolf exchange represent seeing $X.XX still the midpoint lowering year range earlier, growth XXXX. trends

to of full to level, the to prior versus EBITDA $XXX year-over-year the represents and growth guidance from or billion revenue year. we grow XX% Most This segment Topgolf $XXX the to EBITDA we lowered XXXX. million, which versus million for attributable versus XXXX. sales. With a year are year sales our EBITDA venue in still being at to the to represents range Topgolf. At the reduction regard Same $XXX revenue down in adjusted to to forecast growth. QX, lowering X% to venue quarter. prior guidance are expect current Topgolf is our $XXX the $X.XX guide approximately now is XX% adjusted growth slightly lowering fourth at trend million related We reduction same the also be midpoint million, is which midpoint is expected of range current to

at We are represents prior the versus $XXX estimating which revenue million, of midpoint year. the to million X% $XXX growth

Topgolf, represent to growth QX by new decline in venues, be estimating For driven approximately of million to year-over-year XXXX. which to venue mid- versus growth. Topgolf be same to million, are midpoint million, X% represent EBITDA is QX expected compared partially offset revenue would $XXX at consolidated increase we the adjusted estimating single-digit a would of The $XX in sales XX% XXXX. We're to $XX guidance high which range the by

million able EBITDA are and EBITDA adjusted from Topgolf, a takeaway For QX forecast XX% we're important million increase. $XX of to estimating we $XX is approximately our that performance million compared An to grow to $XX QX last in year, QX adjusted even challenging conditions.

by a $XXX-plus million XXXX. to least goal in X year We have of EBITDA adjusted Day at our Investor at pushed

change rates have moved and impact EBITDA negative had close then. on exchange dramatically revenue million time. since to over in that currency $XXX million Foreign $XXX impact since The rates on

us exchange is exchange out to performance negative market push impact, over had impact, our While been the causing year. foreign what's goal combined conditions, a with that softer the covering foreign

providing Embedded information mentioned, term including new flow, we are Chip additional a also cash As embedded today CapEx. we free cash cash call less about cash flow growth flow flow. is

can investment it growth cash business. these power has have better that venues investment. We and noise It detailed can future new business. cash free that then is eliminating We to for think evaluate the quarterly cash basis. On the provide Investors is we year XXXX CapEx the of EBITDA. affect this whether $XXX evaluate cash CapEx important also believe that of of a as to the generation to of new Slide growth reimbursements flows. our $XXX million to company flow on a in however, is and retail because estimated in assumptions is when current the limited growing generation cash For overshadowed the of XX, have a current to we reflects a embedded it and XXXX would separately benefit for CapEx stores. in power in date flow REIT expect over is flow we growth approximately answer, to have this The to some and of related flow timing million breakdown purposes, expect flow of adjusted good investment cash million $XXX way short the may the the approximately significant cash

cash and meaningfully meaningful requirements time, to to free used reduce financing we would cash phase starts are grow as and the the year. Furthermore, be In EPS given in especially Thereafter, that in in cash and expense outpace the XXXX, is EBITDA Topgolf interest EPS growth capital expect at million to increase growth flows slows. headwind least the and interest less XX% depreciation of debt an $XX because down impressively in expect its at forecast current relative decline the amortization XXXX. to however, venue growth embedded expense would see per cycle, Topgolf's as to Topgolf's flows incremental pace venue we pay of interest will D&A XXXX, in financing

EPS the assumed then and XXXX we translation from expect $XX current a are gains and hedge should to in currency there. that from have repeat million off in of at headwind to XXXX in base XXXX. addition, In ramp grow not rates, foreign XXXX

our are investor greater on in this providing detail on Slides XX XX. of all We to presentation

know EBITDAR we adjusted today, Topgolf level total venue interested, the have your presentation for lot of illustrative X-wall an those we appendix patience. and you For have walk to in EBITDA. I thank covered of the margin a segment provided also

the of flexible The well challenging the through proving conditions are we companies I varying conditions in all over well. can strong As time. are in believe go economic enjoyable, you certainly that know, more that. companies process remain as favorable but prosper cycles

We growth conditions. softening are revenue and during demonstrating EBITDA

We endure to have only to and manage we liquidity market are costs, but continue not taking also sufficient growth to action our softer conditions plan.

While we monitor and continue our intact. fundamental adjust to remains as growth conditions algorithm market necessary,

Topgolf also are point inflection in an We at important our journey.

very was developed with profitability an after expense This earnings and growth phase same successful. the negative EBITDA funding and share the on increased us EBITDA We impact accelerate rapid that time, significantly of depreciation the through associated a venues, and first additional interest of per rapid at to phase increased the phase to growth, we leverage the due in was investment. This provide the number amortization The new phase both and resulted such resulting development. investment increased to merged venue growth. required in venues

be X now through are to XXXX. expect Phase We in and it in

begins Topgolf's phase, increase, per flows and leverage this During decrease. share stabilize earnings cash to gradually

X, share exceed in its meaningfully capital Phase down Thereafter earnings increase Topgolf's debt its flow to flows accelerate the its requirements, to pay begins cash company as per allowing cash and well. as

summary. of by conclude brief To a way

grow First, are ability current EBITDA we our conditions. demonstrating under to

solid a execute in liquidity taking third, to financial And and OpEx across expenditures. And are as savings potentially than Chip we sufficient have market planned plan our in time growth merger. the million long-term more at are preparation algorithm plans. capital and $XX to of COGS and ahead of remains reduction close $XXX and million a Second, X mentioned, softer approximately intact, growth action year to costs conditions, position including cost our we for we in reduce the

year, assuming the be Topgolf As a cash this receipt expected December positive well, free flow cash flow will by all company REIT this positive to result, the that year as total of are expected reimbursements be free is XX. and

We operator, that to and said, clear growth. With call open have further questions. a have the path we for progress made now can great

Operator

of [Operator Matthew Instructions] question our first comes And from Boss JPMorgan.

Matthew Boss

Great.

that trend is quarter? the we then, there mid- to in versus store same macro? what point was Maybe break execution? maybe way to basis at single-digit down the plan October guide for much a And seen the comp start quarter? if fourth to high So negative the sales business, how relative current much this you've was How off, look XXX Topgolf to maybe Chip, at miss is line

Oliver Brewer

Sure, Matt.

X the provide look up picking We in Northern QX. covered venue that. side, heat consumer in skew the primarily both X-year quarter-to-date. towards saw August around markets, we little are the are big we you saw stacks And the consistent throughout saw business, QX, both and September, what what markets were your lower and you our in the the sales side October, a we and saw softer in the investor deck, we And during little but showing expected. on versus actually same the a a bit of projecting markets of shoulder we the the on general in Page if different for in bookings corporate August, up little October same to portion the also in little bit with trends bit a picked QX quarter the at further. corporate than a little of Southern saw of expectations. September we in for after markets, And relative a it a the So essence, significantly where couple during down we what us things a dip on what some in is than information, venue and sales saw with Southern bit Southern we're quarter, that's, what we extreme there. Then

the stack that encouraged side So encouraged actual of strong fact the that business the on the side and weekends We're by remains by see the results of the consumer on we're we that And using the very remains to X-year a that encouraged stabilizing. Tuesdays. basis. the corporate business forecast. And fact on fact we're business do we're also our strong by

really, Thursday. So is really little rationalization we're working and events, surge bit to that that's confined side and is that of our that of stabilizing, post-COVID a and the in and corporate the a Wednesday we're then a consumer the that way slowness issue Monday, occurred nature on during, really seeing through

targeting be that we'll So specifically.

Matthew Boss

drivers Great. of savings the you softer on in identified and today just the the elaborate And margin you the despite flow-through And the just side, outlook? on Brian, could fourth revenue the expense cadence expansion from EBITDA outline then, could cost here? quarter

Brian Lynch

it's COGS, it part expenses. The included I'll SG&A reduction personnel then operating input reductions the in -- one really it of in savings Sure. the T&E. just second costs, take other is consulting, first. some included normal and cost a a are that and Unfortunately,

first year. And what so next going was that's the -- on Then question? the into

Matthew Boss

the EBITDA revenue in despite the The fourth outlook. drivers of softer quarter expansion margin the

Brian Lynch

part. lot That's there, be continued. progress to revenues. And a still it Yes, continue They margin. which that's will allowed to primarily, make of Right. softer EBITDA was Topgolf us outperforming main exceed despite the with what great their venue

Operator

The Konik comes Randy Jefferies. of question from next

Randal Konik

at then a at valuation are at in EBITDA when the look guidance down dollars peer before the the very XX% from print, in the even the equipment I just quarter midpoint golf down space. think implied is X%. after I The the core the And I When stock's dislocated hours. the change, that look seems stock multiple

of business you looks weighing good is cash cash a -- again, of and producing we do you given solid think I think the how potential the year. think, though, How this -- turn think valuation-wise then kind flow it, that when strategic it's and is guess how the look with kind be that where with it Callaway you going stock I are or do versus that of voting, do about market numbers should So core lack and how when we the about Or have you consider peers? And even about guess, Topgolf all? business I positive in I flow, about down you at to alternatives? at and thinking said

that? So be nutshell? about thinking we you that think a in how about How do should guys

Oliver Brewer

fair thought we a Obviously, something and Chip. considerable is question to. give that this Randy,

value. That our of economic first time, both strategic what options good Directors our whether we executing We've spinouts, expect, and And that we is cetera. We'll the to the outside just to Board it. long-term the evaluate with business you shareholder of We primary running and that value in think be sales includes we We the job that regularly do do always that the we're that changes As et of that. business practice done control same portfolio, business. recognize fiduciary business of controlling advisers. to would regularly foremost, or increase business, at the right day our do practice. on strategy, continue enhance and focused, could that. it's responsibility the But engagement

any outside a our us both that. viewed would And of our be competitive in Board We a term, as superior over course advantage. we fundamentally as assessments be strategic believe engage have it. regular those and also the will current But advisers. Thus, financial to structure using absolutely performance to option showing do, provides long business, strategic

Randal Konik

a, then my last -- Got for you've been be it. this would maybe give And in business forever. some question this industry perspective us in on,

the golf based years couple well. been next the You've perspective on some to thinking that of level it. a of looks. And about years the as contrast in extensive on us number kind you're of give how Board before that Board years of of history merging the that maybe then its with how on tenure industry or now what and your it's based over for Maybe for or different Topgolf see business similar Topgolf equipment on relates your with number as it on the industry outlook with at a

helpful give just flavor, very as about that... So us that we would be think

Oliver Brewer

sounded has the optimistic more little and of in golf. fundamentals to, But to to something never forever I'm my in business the in it do been overlook long-term Happy with going much bit comment be Randy. because like Equipment been the general Sure, I golf age. on the Golf a you've can't industry healthier.

it metric. see every You can in

can around game. the You see momentum and energy

growth. structural see You

game and see ever the invested money dedicated seen. You in you've more being than and around

see more You diversity. may

not significant will in Topgolf, had in now off-course all only You golf than U.S. be just a on-course way. golf Topgolf only golf, larger the off-course never And

sales position, sign see And weakness We same. that obviously have the same our brand's to brand Obviously, through. is it's there. Golf strength so consumer some good a on so we're very strong do in strong our Topgolf's very in just working about position. a there not and the of lot consumer feels and We the short-term me, business, side, good volatility venue fundamentally in Equipment a concern out side. And some of momentum that on any

that the As was and working event we're I've a a surge business that corporate now. that in through is stated, post-COVID lot of our side of

we you but our we same successfully. margins. On environment. strength. If we EBITDA even this maintain on stack venue pretty have be would margins the shows of would mean think, That's We're address to, that, sales opening of ability the the that and in beat out, we nothing sales data. took that numbers And a the I soft miss. clearly noise impressive. it despite X-year be our venue top And and just same the increasing we're business venues

going So best do sure sees clearly them. the we that to I over both to our market businesses deliver term, we're as feel and very these bullish about of make long the those

Operator

Imbro comes question from Daniel next of Stephens. The

Daniel Imbro

sense you versus Maybe just you side, to is break the Topgolf down continue what on here, just a fixed just think especially we quantified? could provide question. your get more a looks side how variable And synergies those Topgolf. about guess, about I as at can color as think on tougher $XX to we the catch there the deliver of that million to the I structure to last? answer Trying Does venue you this better top cost XQ the ability some include EBITDA cost guide side like what comp the what line, for of said, didn't of trend negative long earlier and cost EBITDA

Oliver Brewer

of the on drive is that we're to confident, little that front. and the and versus -- it primarily we be on or so DLF debt, of year, next improved Topgolf. know, margin one drove to Daniel, year-over-year basis going we're be do to points -- that. of will synergies what do continue be try cost the variable, to I longer out -- and we've grab we're there's so terms time. But don't we to dependent the showing want believe able Brian drive mid-XXs but I over that out And -- could these, EBITDA side we're -- margins time, versus profits isn't obviously, candidly, variable we've Daniel, else can to XXX the side? you period fixed in Because, increase shown to definition a we than Patrick, continue cash of that other very all variable of can believe the very we near fixed on and Topgolf going margins,

Brian Lynch

a portion is the is and up goes reasons they a that significant up can down as we've so of venue right? adjust their hourly great Labor down. one of most of venue expense, a -- never same They that, the And margins. of and of venue is the do adjust. sale -- expense workers, they job can flexible, revenue which and grown the lot It's

that. So they're pretty at good

saw COVID significantly to. different that can it have they like reduce that. You during They if even places in

Patrick Burke

progress, efficiently, right, utilizing that you And and comp. even also EBITDAs labor that's that they're have those a driving if efficiency that ability, They're just more to then right? -- you at that though right? sales increase much really making So is same look where -- negative venue

Oliver Brewer

room continued the the And that unlock all PIE But efficiency business, venues. around in that Daniel, we'll the as gains. is having system, here, thing, last we the then the obviously but Vegas, helps on us efficiency work helping multiple drive here, of sides

You through its way system. can as percolate QX through see it the starts in data it to the

Daniel Imbro

Understood. And then maybe a follow-up on Topgolf comp. consumer the

fewer seeing you're less visit, people given about you the easier. think that to Is weather trade kind that months, to ticket guidance softening, I can for do like decision we're then quarter come? And based that you in given? the Again, Is it or food less in with obviously the manifesting decelerate talked get as on smaller you risk comps recent per consumer guys consumer talk the trend and spending of I what I about you know have guess, how comp the guide keeps guess, about But a when attachment decelerating So just did seeing. down visits? fourth October? that

Oliver Brewer

Sure.

actually The so visit. traffic. First corporate a question, what miss spend is but traffic, of -- slight increase we most traffic spread saw visit, in in and over was per per but and QX consumer, the not spend was

the and on our mentioned, those up. comps were Tuesdays, As on weekends

very aware a or isolated softening targeted, is we're trend. but this of So

our way. And -- the quarter, what is our if the that had what again? can to second were a been good fully, during part pretty said at comps you of not to it seems still think which I basis, X% comps X-year one look year-over-year and me. I would up you was But question just encourage just you consumer the flat stack on have

Daniel Imbro

Kind continues risk like [indiscernible]. think as guide. the in the incorporated the and the we see not headline slowing, Just sounds about it the risk to consumer that's guide traffic of you if how

Oliver Brewer

not We we're we seeing, than forecast. did seeing lower than not but we're what forecast what lower

Operator

James. The next Raymond question Joe Altobello comes from of

Joseph Altobello

Sticking not surprisingly. Topgolf with

And I you state comps what single this do do Just comp. curious good kind ascribe this least is from this what to we because a business, sales the if you get doesn't that is. low it fairly digits. we acquired when value business ask this anemic, guys -- steady go is stock, run for I the rate And do think to pretty what on investors were at biggest we the if same back venue pushback of

run saw would help for same-venue materially sales. think than understand a pre-COVID? to rate what So is the And what higher you steady-state be me we normal it why

Oliver Brewer

advantages time. here. we There's deliver right? around including consumer on lot and think, that. business. X% the is we we concept. is in deliver day, comps. will those that golf, the to only all not doing be as that We We that's is we'll deliver marketing the not different national a believe a tailwinds well. Back the of implementation terms And are positive the it. basis, pull there's a important, going There's were we venue unlock are can only Well, that and engage. volatility quarter-to-quarter Joe, believe sales game positive of and that digital, growth that. golf But venue We're digital help But the low growth. off-course great in indicators That's sales multiunit how levers will drive of wants confident to is be strengthening we in Same low some and muscle. we but but just improvement the of momentum Topgolf we're the other the able that and a further can advantages and scale we'll areas have we to over single-digit presence in now will they scale same comps This the on this scaling weakening concept believe single-digit that venue not our behind have driver

venue sales be those is is elements. It will scaling the improving all margins have venues. bases important and in of element. I same this an on one here, the multiple We mean

it it deliver will thing might if focusing the But on it. as mattered, on We that was I only misplaced. be think,

Joseph Altobello

I No, understood. -- question. But which I valuation, why the it But asked and does matter guess... is to

Oliver Brewer

the as quarter well Absolutely. invite to the data. look you as And stacks I X-year X at

Joseph Altobello

to up just on the number Okay. follow right mind? Is still XXX that U.S. quickly. And venues your very in

Oliver Brewer

more previously. was Yes, probably and than derisked it

Operator

of comes question Perry of from next The America. Bank Alex

Alexander Perry

Maybe about in rates? for growth thinking this cap unit down You the you about a mentioned can to in just, us you slowing environment venues. you It next talk XX bit finance outlook like versus financing Have Topgolf? first, environment any maybe this seen in Xto and the changes are with way change growth X How that? some the you unit year. year maybe big you're the sounds

on environment unit the Just growth TopGolf. more financing maybe color for some and outlook

Brian Lynch

Brian. Sure, Alex. This is

we doing were has First, that. we just venue. That is clarify, One, the purchased do want as of to just I to just another financing. the -- slowing mentioned, growth with unit Chip nothing

comment And for unit choose REITs to There's cap or it's is rates so the us. the about the The environment here the are as venues because, self-finance to once our only reasonably would growth. and interest interested you land REIT be for really to steady. The stable unrelated holding among The there The strong. might business. a not venue remains then is it the and interested, we for might we competition they're venue something in But in a or else, want do while, use part, ourselves. -- us. run partner just where with into the most restrictions REITs for

Oliver Brewer

next more just in those uncertain obviously the growing we're change commitment the building positive what in Alex, and bit environment. flow venues cash is little And a year amount that cash to is being flows our of

flow, capital so we're And when those talked positive the that allocation, to and we balancing always delevering too. right, about but that in also business said we've we committed cash invest

long seeing growth And adjustment, we in run. without term in so opportunity getting the an would, us that off business just you're great has we the like the the said making short

Alexander Perry

this And That puts that initial of takes lot you framing together Any models next for just here? considering least there provided our help quarter, to sort we start a last be put at qualitatively sense. some or year and on of we Perfect. as then on should year. makes

Oliver Brewer

we're for environment. than environment, The potentially of any not time -- just projection in Brian Sure. consumer along XXXX are cash a down the growing but mentioned. and we'll reality made between flow, with for the will of preparing D&A case. that's is be we making revenues is That at projections that the specific softer EBITDA, flows. this going a not be We're a the EPS is short-term items accelerated that going timing investments down and resulting of and The byproduct just other mismatch because cash our EPS we've

the business, XXXX of call. one feel long-term of direction our three that, of near-term about in in midterm the post-COVID drivers. we area We'll provide for we earnings and happening guidance growth as what good with very consumer in action volatility detailed improvement. our of clear direction But the strength think and direction remaining at I this There business. on business, an with business PAT we through the one going have the of say, me is got also the a you events next -- have heard side the clearly there plan actually surge is little detail We've the

other think go any to with I but questions that. happy further we're covering on So that,

Operator

Sachs. McShane from Goldman Kate of question next comes The

Katharine McShane

Asia think This we to And proposition how Just about better ball us. fire, weakness. any a wanted done has about but the the maybe on there's a offering it's factory too works, there then value supply couple us Wednesdays and you the asked and how couple what offering? a if and sales of Could just margins your your Tuesday looking this ask Thursdays. have been to about regards with for for increasing remind impact from and questions times, to update of on you

Oliver Brewer

let is just start. Good off play Half me -- on Kate. questions. what it like. game Thursday Tuesday sounds Sure, and Wednesday well,

pay have Tuesday, charge And game play. for We a on that you if you come we half. rate

has we're sure did And extra Tuesday good. We're margins place Previous the are what on that that have XXXX and If be for otherwise a and capacity. a in Wednesday We'll those Thursday. to so going been volume those. It and day increased week in just those time. something It looking quite place. going of start broadly do not at has then long trial. put be place in margins capacity that where It they trialing a of make on And would pre-merger. drive since of types team will lot similar be the targeted promotions drives been with. not has some that traffic incremental is to we -- centrally currently out been and incremental a use We're utilized to rolling and profitability. extra that

that go, it game and room very plan to promotion. But margins do doesn't to a because help have would could we'll have we've we to be any negative watch way improving I'm we we're are sure updating structured be on absorb little fact with good over cannibalize this. that. it -- the got impact but naturally that we're will clear that that's weekend traffic only on time currently And We that the way profitability as given that got pretty we've pretty where headed you And and operate. the

terms In located a next key the factories. Taiwan to of was our in obviously, that a of It their tragic at fire, factory dedicated Launch in fire of the one us. vendors the was was factory factory It fire, event to called one Tech.

factory go loss of own some -- -- So -- had building a our was Taiwan, they for prayers it unfortunately, but next our we life The the factories And do any and thoughts value that plant the of this that and to had all located tragic dedicated and have golf balls destroyed, a don't fire was people was them. injured. there to out and fire. of in

It They are supply at think this our has but just impact on not And point, of of this our the a it do or team financial team, running at it in not from wonderful that business noticeable event. will was our perspective not we plant other efforts capacity, given finding a And have market should strong job tooling or a operations a supply. moving a time. material be point done around. tragic

Katharine McShane

the further know today. follow a But seeing to about on wanted that's there And up Asia. just I commentary any I QX you're smaller why you're what reducing part of QX? to just guide

Oliver Brewer

saw but on of We Yes. decided for Kate, it's business, we worth to still a little softness QX. We're our clarity mention currency-neutral there, it not up transparency. almost, and but through given just year-to-date the scale basis a mentioning,

here, is Our market Almost The other little slowing. Kate. market a good. -- was of on Japan But decent, see the Korea a shares it bring up. little to nothing are but down. bit we're had still hand,

a our eye but the a which as in we've rates Topgolf, at about. talked primary and part sales of factor an as venue and Not year part of small in business balance it. issue keep our nice forecast of had year change the business our The same forecast. FX general does balance on a Just is massive of for on reduction

Operator

question Trading. Casey & Research comes Compass Alexander from of Point next The

Casey Alexander

a easy and and with I'll that's been commentary say, unfortunately age of for me, these little some to that forever, commentary harder questions. we've going for a around on work -- that's then me. start I'm Chip,

First little finance that was plan competitive color was BigShots. transaction. What's How the a an Why available? very kind more on unusual since it to Just of it? it's the little commentary of surrounding all, process?

Oliver Brewer

for confidentiality in that that the And is to world reasons the else as -- essence, with together. about provides, that an in positive what basis is of could world is a structure There And the in going other nobody almost know able than, our that points process disclose a right? this well. much expect, in be the touch there could could that work we this at key you would partner else It is Invited Casey. I quite I'm and unusual strategic the of transaction, synergy is we're not to nobody people too the making all aware on deal I

and the side equipment businesses. well and Toptracer of one and product the as our having venue unique being our business about So of things as the structure

$XX given we -- often a million $XX is our again, in scale, million, invest But of $XX than terms million. when and but is cash. In more our is financing, we it And relevant. venue, paid venues,

we that deal no so accretive be And think strategic for parties, highly material hope. both also and it's from we will basis. And a impact

Casey Alexander

Okay.

sort about debt company But that its back to in from might the potentially is of a peak? it the relation there's venues. for some pay extra and rise a haven't and of close Is the in $XXX debt in venues. since hear the cap what self-finance up, the competition to rate rates have REITs the given from couple and down take all purposes, to especially order there having of million that of in the market the the fact this that gone war earlier less the captured to have plan refinancing necessary earlier, to has Secondly, pitch be, than intents year, and to some appears I seemed continue some some company it for a to it for chest

Oliver Brewer

Casey, just a it's Yes. on matter of timing that.

you term it don't going we financial to periods these short but is We, type the consumer plan it of one the give in able to short-term we we're the us does but where wrong of any the be for withstand time were for for to and are -- just best, of essence, case. plan This risk. keep So need it, have going flexibility. to if in weakens,

and So price the the flexibility of strength forward. to it's small financial we for going pay position have

no concerns now. have on the right We REITs

There's a for occasionally We case. for. yet have that And in we will always year venue every are we is no trying the change won't That's been line be REITs that next the up lined use plan. up. there to REIT that

would be will the in You year, We And things self-finance. assume happen. roughly close too that. El foolish Segundo. Those can that environment, to need flexibility running edge for the self-finance opinion. We in do essentially we X our per today's

have of flexibility need time, near extra bit going we into future. we won't it. So Over little a the

Operator

comes John of The next question Kernan David from Cowen TD Research.

John Kernan

you chunk and towards it EPS this deck $XXX on million hit is very XXXX that coming out, I EPS on a from interest in of the and non-GAAP XX deck, big looks Slide Brian, think earnings the presentation like other thorough So expense reaching ramps income put the $X.XX slide.

that earlier, Maybe Slide I think hinted but and going talk expense why is maybe to that XX. it's just that rise level. you interest on to -- to talk I to it financing that why mean

Brian Lynch

financing. Well, it's part additional of the venue

is you'll So you'll the see it it ramp see where And XXXX, we increase from then are. and to of there. just part it stage

as generate goes and I has will interest we interest assumes the -- debt. mean, we flow cash interest, Topgolf pay down corporate off. to expense lot the as The D&A so down And pay a the and up. That it of fall new starts it builds D&A that's And -- venues.

XXX We is, each rates. also in think, I assume year, reduction forward conservative basis rate the point of some which than

John Kernan

into Okay. and obviously, just of Got QX Topgolf you've period about do for? into Topgolf sizable year next out expansion margin itself, it. margin get How us we detailed EBITDA then and think XXXX as we to metrics And this given and back EBIT year-over-year. pretty

Brian Lynch

Yes. I extra -- there's to not with more to to believe they over room -- regard next do they say have going would venue for give go We're guide expansion. year. a

developing continue they initiatives. will implement more that So as

Oliver Brewer

from telling Yes. too hit you we're XXXX, we're that not XX% The we'll and far by margin, right now.

fairly that's hopefully, credible. So

Patrick Burke

kind of that Slide provide total X-wall margin. the walk Yes. John, EBITDA. in just -- kind and deck, we we is margins illustrative hit from did to the when It's XX Topgolf XX% of the and on

of be related as get the venues good including would really the you what to EBITDA well. margin cash and what a So then is EBITDA idea margin the interest the

So that questions, have if take us a at you slide. more let And peek know.

Operator

Wold of from Securities. next comes question The Riley Eric B.

Eric Wold

guess, on I X the X of parts kind Just, question, Topgolf.

completely just follow-up. open plan And the potentially venues removed, been Or pipeline? drove 'XX, to to XX going shifting a everything quick to X X to from venues next and back And what merely back? removed have I you year have On the ramp anything are has those any if been in decisions?

Oliver Brewer

It's of land down the exit a remove issues, you your pipeline course as and environmental. of development forward from pipeline because We path venues would, process. further you the enter business, venues regular falls if get permitting the through occasionally where

course business, as the So the from normal -- shifting a change in that TAM venues no otherwise yes, and from perspective. only of just that but perspective

improves XXX, derisks fact, believe Invited I probability of and not, In our the if acquisition more. of getting

Eric Wold

the would kind quick follow-up. be assume of financial bit holding longer? on Any potentially I know be guess, it a late were venues locations. -- from that penalties, kind of a wouldn't just then I those it of opening It year And little kind any shifted, -- kind of, But meaningful. timing, to next probably impacts of committed are

Oliver Brewer

cash doing we're capital of shift what over the our which allow X next flows. And is over us material. will $XXX nothing years, to this No, with million conserving derisk

this Our next operating good they in current quicker the environment that advised move year. is we to as a further debt year. assessed move decision situation, allow some cash are more increase believe the we've and have the meaningful which projected flows is paydown and positive investors us be circumstance. are This that a They would year, projected prudent derisks a should think to into next whatever

on how the is. what is right? what is we returns venues So what the because capital, of then much number important as amount we But of that XX we're isn't capital said into approximately is -- doing put and capital deploying play

that's about. is capital of what $XXX to good is you noise. of opens million think deliver capital, XX% is whether or feel XX for, deployment gross The December going or venue that we're ROGI, If venue January pipeline, the about venues really XX we in aiming it, build that venues versus that's X --

Operator

comes question from next Morgan of The Megan Alexander Stanley.

Megan Christine Alexander

bigger perhaps it is Topgolf Could both the degree tale I year seems some like guess year dynamic on of the term? to next -- then and probably the traffic high us maybe guess wanted pricing the based about you're that X this longer from your some on price. give side. same comments on venue And you thinking most halves sales how of medium comes picture more I the traffic between just in in level. and I perspective to venues, the and

period taking the and I sales at venue look over except for guess to of think on days a traffic the longer the a So Tuesday. your proposition comments do you same value of contribute week, how evaluating what should and Like about pricing time?

Oliver Brewer

the time. be Megan, expect able we So traffic short price and of over to period to the both of drive is longer and it long

And down consumer It the volatility the but up was during -- term. so But our -- down of slightly some or up. first at our was per we year. the QX in and was confusing risk QX, traffic are short the business was you, it seeing visit was in spend of in half

with dealing So the just a events is business COVID lap.

down an long we'll normalize equal the on basis And a So we'll is drive the traffic able traffic through year-over-year to on price of events business. that, the and amount we as over run. we work it. But believe be

haven't weekends. the clearly, trends We're there's believe, is interesting those You of we're price And but people not -- fairly stack. what will forward, are and it weekdays we on that's the hearing kind you about during seeing go clear. I'm so think do. but of sure where but I -- not sensitivity, do trends, -- see some it X-year -- tired in you we're the seen that, we

Megan Christine Alexander

the and out term, And in the U.S.? of do think an acquisition. the concept test about those opportunity just longer maybe follow-up franchised. helpful. on guess to a Three maybe That's are I locations BigShots perhaps franchising with see you the franchise Okay.

Oliver Brewer

clearly, majority But we're have the experience with operated some business, on current with have franchising our pleased strategy. side. we them. we're our with business the of Well, returns We that and experience we'll generating on franchise owned our international and the pretty

we that. to them And continued So the acquire, to has on U.S. and pick at will continue and for -- to a primary as the certain, franchisor. of operate couple did convert other open-minded under or a franchised. We'll up U.K. facility. with Topgolf BigShots to us stay the we moment that BigShots But we converting look but in those be they the venues venue will to the operated Toptracer. owned plan forward we that we'll will are And the that

Operator

This turn any to for like remarks. Brewer question-and-answer our the Chip to conference I back would concludes session. over closing

Oliver Brewer

thank Thank in or a through talking and helpful so than normal. and want think our and had which present that your call will and was appreciate provide We go byproduct helpful we a in will forward next unavoidable you we information, to at all to obviously information business, investors. We lot highly today wanted look just be calls I to new follow-up call XXXX. in to to for that earnings needing either you. our we'll for think participating an evaluating longer be to of to what again early we of this some everybody interest, cover, tuning in

Operator

conference may The and concluded. now now you today's Thank attending disconnect. for has you presentation,

Topgolf Callaway Brands (MODG) 8 Nov 232023 Q3 Earnings call transcript